State oil companies, which control half of the world’s oil and gas, are mostly unaware of the risk associated with the energy transition on their activities, often crucial to the local economy, according to a report from Natural Resource governance institute (NRGI) published Tuesday, two days before COP28.
“Although the energy transition presents significant environmental and economic opportunities on a global and national scale, it also brings significant challenges, in particular for fuel producing companies and countries,” underlines this report.
The climate conference in Dubai, which is chaired by Sultan Al Jaber, CEO of the Emirati national company ADNOC, should raise awareness of these companies, the NOC for “national oil company”, which have the particularity of being majority-owned or entirely by States.
Dominant on the market, they control more than half of global gas and oil production, and many remain very dependent on oil and gas revenues.
They are in fact very exposed to the energy transition which aims to reduce the environmental footprint of energy production and consumption, in particular by making them less dependent on fossil fuels.
The think tank Natural Resource Governance Institute (NRGI) analyzed the public statements of 21 national companies of all sizes, covering 16% of global oil production. He concluded that “too few are doing very little.”
“Only 9 companies analyzed out of 21 recognize the risk of the energy transition, 4 mentioned the use of transition risk assessments and 5 explicitly mentioned strategies to mitigate the risk,” write the authors of the report Andrea Furnaro, political analyst , and David Manley, senior economic analyst at NRGI.
Among the 5 companies which have explicitly communicated on adaptation strategies are the Chinese company CNOOC, the Malaysian Petronas and the Colombian Ecopetrol.
“While the environmental rationale for NOCs to divest assets related to fossil fuel extraction is clear, from the economic perspective of these companies and their governments, complete divestment is not an obvious solution,” according to The report.
According to the think tank, at least six companies even plan to increase their oil and gas investments to secure their energy supplies.
Divestment from fossil fuels “allows governments to diversify their economies and adapt to climate change, but if demand for oil persists, NOC investments could bring significant sums to their countries,” the authors warn.